TCS Daily

Booing FDR

By Duane D. Freese - February 3, 2005 12:00 AM

Amid the applause, there were a few boos for President George W. Bush during his State of the Union address. Most came from Democrats when the president spoke about reforming Social Security.

But as TV cameras panned the room, even as most Democrats could be seen sitting on their hands, a few did clap as President Bush set out his principles for reforming the system, including offering the creation of voluntary personal accounts for younger workers. And there should have been: After all, it was a Democrat's idea.

No, not, the Democrats Bush mentioned while talking about Social Security -- John Breaux, Tim Penny or the late Sen. Daniel Patrick Moynihan -- but one he quoted in conclusion.

Franklin Roosevelt, the same man whom Bush quoted as saying that "each age is a dream that is dying, or one coming to birth"; the same man who gave birth to Social Security in the midst of recession; also said, in his Message to Congress on Social Security on Jan. 17, 1935:

"In the important field of security for our old people, it seems necessary to adopt three principles: First, noncontributory old-age pensions for those who are now too old to build up their own insurance. It is, of course, clear that for perhaps 30 years to come funds will have to be provided by the States and the Federal Government to meet these pensions. Second, compulsory contributory annuities that in time will establish a self-supporting system for those now young and for future generations. Third, voluntary contributory annuities by which individual initiative can increase the annual amounts received in old age. It is proposed that the Federal Government assume one-half of the cost of the old-age pension plan, which ought ultimately to be supplanted by self-supporting annuity plans."

Those are the same principles Bush is upholding today, and those Democrats who booed Bush derided them with the same exhalation of breath.

As the new Washington Examiner editorialized in its first edition:

"Consider this: If we let a worker earning a $24,000 invest all his and his employer's Social Security taxes in a modestly performing basket of stocks and bonds, he could retire with a nest egg worth more than $875,000. Social Security, by contrast, promises him benefits worth only $292,230. In effect, Social Security will rob this worker, and millions like him, of half a million dollars."

Another Democrat had figured that out long ago. Sam Beard, who was a staff assistant to Robert F. Kennedy in the 1960s and founded the National Development Council to help low-income communities, authored articles about turning poor workers into "Social Security Millionaires" by allowing them to gradually put their Social Security contributions into private accounts.

As Sen. Moynihan, a staunch Democrat, noted, personal accounts for Social Security would provide the first opportunity for millions of Americans to create wealth. That opportunity is now squandered as an eighth of their income is placed into a system that at best offers a 2 percent rate of return, and that only if taxes for it don't rise and benefits aren't cut. And without reform, that won't happen. By 2042, Social Security will have to raise payroll taxes or cut benefits by a quarter. In either case, the "return" on contributions for average workers will be negative.

For two decades now, I have wondered what is wrong with the anti-reform Democrats. Why are they so opposed to giving poor and middle income workers a better deal? Why are they against poor and middle income workers accumulating wealth? The only answer I have found is that they think that putting money into people's hands will make more people Republicans. But sticking millions of young Americans with a bad deal won't win them many votes either -- not when those young people figure out that the supposed party of Roosevelt has turned its back on its own principles and on them.

They are the death of an old dream, while those Democrats who applauded Bush are the party's best hope for giving birth to a new one.


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